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Beneficial Ownership

The Companies Act No. 10 of 2017 requires companies to maintain, update and share a beneficial ownership register of all shares of a company (both domestic and foreign) and their associated voting rights, and to provide a statement with information on each beneficial owner during the application for incorporation. The regulations provide for unrestricted access to the beneficial ownership register by law enforcement officers and allows requests for access by persons “showing sufficient interest to the Registrar.”

The Companies Amendment Act of 2020 broadened the definition of beneficial owner [to bring it in line with the Financial Action Task Force (FATF) standard]. Beneficial Ownership is defined under section 3 of Companies Act No. 10 of 2017 as read together with the Companies Amendment Act No. 4 of 2020 which means a natural p[person who;

(a) directly or indirectly, through any contract, arrangement, understanding, relationship or any other means ultimately owns, controls, exercises substantial interest in, or receives substantial economic benefit from corporate;

(b) exercises ultimate and effective controls over a legal person or legal arrangement; or

(c) effectively controls a legal person or legal arrangement on whose behalf a transaction is conducted; and the terms “beneficial own”, beneficial ownership” and cognate expressions shall be construed accordingly.

For clarity, the Companies (Amendment) Act No 4 of 2020 further defines “substantial economic benefit realised by a natural person from a body corporate legally or equitably, of at least five percent of;

(a) distribution of dividends; or (b) proceeds of a transaction.

The word “Substantial interest” in the said Act means at least five percent ownership of shares of a body corporate by a natural person, legally or equitably. On the other hand, and under the same definition, “Control” means the control of a company by a person who;

(a) beneficially owns more than 25% of the issued share capital of a company;

(b) is entitled to vote a majority of the votes that may be cast at a general ~ 65 ~ meeting of the company, or has the ability to control the voting of a majority of those votes, either directly or through a controlled entity of that person;

(c) is able to appoint or to veto the appointment of a majority of the directors of the company;

(d) is a holding company and the company is a subsidiary of that company as provided for in this Act; In case of a company that is a trust, has the ability to control the majority of the votes of the trustees, to appoint the majority of the trustees or to appoint or change the majority of the beneficiaries of the trust;

or(f) has the ability to materially influence the management policy or affairs of the company in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of control referred to un paragraph (a) I(e).

The ZEC adopted the BO definition as provided in the Companies Act 2017 for EITI reporting purposes.